Snap-on (SNA)

Professional tools and equipment manufacturer Snap-on (NYSE:SNA) fell short of the market’s revenue expectations in Q3 CY2025, with sales falling 4.5% year on year to $1.19 billion. Its GAAP profit of $5.02 per share was 8.1% above analysts’ consensus estimates.

Company Overview

Founded in 1920, Snap-on (NYSE:SNA) is a global provider of tools, equipment, and diagnostics for various industries such as vehicle repair, aerospace, and the military.

Automation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand. Some professional tools and equipment companies also provide software to accompany measurement or automated machinery, adding a stream of recurring revenues to their businesses. On the other hand, professional tools and equipment companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors of Snap-on (NYSE:SNA) include Stanley Black & Decker (NYSE:SWK), Illinois Tool Works (NYSE:ITW), and private company Bosch.

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Snap-on’s 5.6% annualized revenue growth over the last five years was tepid. This was below our standard for the industrials sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Snap-on’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Snap-on’s organic revenue averaged 3.4% year-on-year declines. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, Snap-on missed Wall Street’s estimates and reported a rather uninspiring 4.5% year-on-year revenue decline, generating $1.19 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 4.1% over the next 12 months. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below the sector average.

Snap-on has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 51.4% gross margin over the last five years. That means Snap-on only paid its suppliers $48.63 for every $100 in revenue.

Snap-on produced a 50.9% gross profit margin in Q3, marking a 2 percentage point decrease from 52.9% in the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Snap-on has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 25.5%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Snap-on’s operating margin rose by 2.1 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q3, Snap-on generated an operating margin profit margin of 29.2%, up 3.2 percentage points year on year. The increase was encouraging, and because its revenue and gross margin actually decreased, we can assume it was more efficient because it trimmed its operating expenses like marketing, R&D, and administrative overhead.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Snap-on’s EPS grew at a remarkable 12.3% compounded annual growth rate over the last five years, higher than its 5.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Snap-on’s earnings can give us a better understanding of its performance. As we mentioned earlier, Snap-on’s operating margin expanded by 2.1 percentage points over the last five years. On top of that, its share count shrank by 3.4%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Snap-on, its two-year annual EPS growth of 1.8% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Snap-on reported EPS of $5.02, up from $4.70 in the same quarter last year. This print beat analysts’ estimates by 8.1%. Over the next 12 months, Wall Street expects Snap-on’s full-year EPS of $19.08 to grow 4.1%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Snap-on has shown terrific cash profitability, putting it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the industrials sector, averaging 17.2% over the last five years.

Taking a step back, we can see that Snap-on’s margin dropped by 1.9 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

Snap-on’s free cash flow clocked in at $258 million in Q3, equivalent to a 21.7% margin. This result was good as its margin was 3 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends trump fluctuations.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Snap-on hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 24.6%, splendid for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Snap-on’s ROIC has decreased over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Companies with more cash than debt have lower bankruptcy risk.

Snap-on is a profitable, well-capitalized company with $1.53 billion of cash and $1.27 billion of debt on its balance sheet. This $262 million net cash position gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We enjoyed seeing Snap-on beat analysts’ organic revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its revenue missed. Zooming out, we think this was a mixed quarter. The stock remained flat at $332.59 immediately after reporting.

Updated: December 4, 2025 at 10:14 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Snap-on, you should also grasp the company’s longer-term business quality and valuation.

Snap-on isn’t a terrible business, but it isn’t one of our picks. First off, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its admirable gross margins indicate the mission-critical nature of its offerings, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its organic revenue declined.

Snap-on’s P/E ratio based on the next 12 months is 17.4x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $361 on the company (compared to the current share price of $346.13).